Today I Shut Down Our Servers

Startup CTO Insights

The most important lessons I learned from my 3-year journey and $1.5M investment

Today I shut down our servers. Clicked on Menu -> Action -> Terminate Instance. The three-year-long journey called KolGene has reached its end… It was an emotional trip that taught me so much. I’ve collected here the priceless lessons I’ve learned — be smarter than I was, don’t go down that road.

January 20, 2016 — I got a message from Eyal Gura, one of the best entrepreneurs and investors in Israel ever. He told me about the technology that was bound to disrupt the genetics field and asked if I was interested in joining the startup as a Co-Founder & CTO. Sure, I was! It was an unmissable opportunity. Actually, I was so excited about joining the project that I went blind to some important issues. I didn’t use everything I learned before about building a team and finding the right partner. This is where I started making mistakes.

Well, mistakes made — lessons learned.

Lesson #1: The beer test

Having the right partner, the one who complements you in the areas where you’re less capable, is essential. But more than that — at some point you’ll badly need someone to help you navigate through the storm. If one of you is in a “low” mood, the second one is taking the lead and bringing back enthusiasm and joy. Me and my partner Dan who took the CEO & Sales role got to business right away. I knew he was good at sales, but I never wondered whether we were a ‘perfect match’ to get into this venture together. And it hit us a lot during our journey, especially when shitty things started happening.

My take: Beer test is an absolute must! Invest in building a relationship, decipher the signals of how your partnership will work out when the shit hits the fan. Don’t be afraid to ask tough questions. What you’re getting into is more than marriage — you get strongly bound to your partner, both of you have mixed feelings, and everybody around you tells you “No, you’ll fail!”. It’s the most crucial part of the venture. When storm clouds grow (and trust me they will) — partner up with someone who can save the day.

Lesson #2: Go out and talk to your customers

The whole idea of the startup relied upon our “gut feeling”. We validated our business case on a very basic level only. We haven’t really dug into the problem, market size, opportunity, and if it was the right timing. Our market research was narrowed down to our local Israeli experience. We developed the first version with Israeli market, Israeli clinicians feedback and our local regulations in mind. No surprise it was very successful in Israel. However, our experience had nothing to do with our target market — the USA. A month after we launched in the States we realized how wrong we were with all our assumptions. The market behaved differently, a different genetic aspect was of greater interest, the regulations were much stricter. The price we paid was high. We managed to recover and to pivot the solution, but we lost about 9 months of a runaway.

My take: Get beyond your small world and talk to your customers, your real customers — ASAP. Today. Yesterday. Put this forward as the main effort of your whole team. Everyone should be involved from CEO & CTO to every developer and designer. Whatever the outcome of this ‘field work’ will be (an MVP, a prototype, mockups) — you will get so many insights. Trust me — your mind will be blown up!

Lucky us, we succeeded to pivot very fast and get into the US market with the improved solution. The initial feedback was very good. We got dozens of clinicians using our product within a short time. It was exciting to see the graphs climbing up month by month:

Number of genetic tests managed on our platform

We gained momentum, but our initial investment of $1.2M was running out and we decided that this is the right time to start fundraising.

Lesson #3: Fearless fundraising

Fundraising is a very destructive process. It shifts your attention from actually running the company to hearing why other people don’t believe in it. Every single meeting you are convincing someone that your insane idea is not really insane and your team is the one who is capable to make it real. 99% of the meetings will end up with a “No”. Sometimes, you’ll get honest (or not very honest), but very subjective feedback. And more often than not — it’s not about you. It’s about everything else — stage of fund, portfolio, VC partner availability or relationship between partners in the fund, sometimes even mood. But the “no” is same no and it doesn’t matter.

We had a strong product, we had initial traction, we operated in a very tough but fast-growing market. But we weren’t resilient to all “no” and disbelief. As a result, we were so stressed out that we accepted the first VC term-sheet offer. We ignored our investors who advised us not to rush and use it as leverage in ongoing negotiations with other funds. My partner said: “We have a term sheet in our hands. Why risk it on some other potential uncertain opportunity?”. I agreed with him and regretted it in the end. VC pulled the term sheet one day before money should be in the bank account — for an unknown/personal reason. This happened after the leading Israeli law firm confirmed to all investors that the due diligence process has been completed and authorized everyone to sign the contract.

My take: Take your time. Treat fundraising as art and a series of required (and often recurrent)actions. Build your company as if you don’t need an external investor. Investors have the same FOMO as you. You’re afraid of not getting money, while they’re afraid of missing another Google. If an investor really wants to get into this journey together with you — trust me, they will find a way to convince you.

One of the investors that I respect said: “The best investments I made were in the startups that didn’t need my money.” I truly relate to this idea.

Top VC has a list of missed opportunities including Facebook & Google

Lesson #4: Founders’ resilience

When the shit hits the fan, it’s all over the place. Our investor bailed after the lawyers verified and confirmed the deal and thereby killed all other investment opportunities for us. The offered term sheet required a “no shop”, so we informed all other funds right away that we stop discussing our deals with them. When we came back to them — the first question they asked was “What happened?”. The worst thing was that we stopped believing in ourselves, in our ability to drive the company to success. The investors we already worked with stepped in and became our shoulder to lean on. Here I’d love to express my deep respect and gratitude to almighty Eyal Gura and Allen Kramer who are amazing investors with a huge heart. However, we had to make tough decisions — cut the salaries, fire employees — leading us even deeper into depression and frustration. The gap between me and my partner was growing. I was looking for someone to blame for the failure. (I chose my partner to be that someone.) It’s still bugging me that I wasted my energy on these emotions, instead of stepping out of my technical zone and getting involved in the business matters (find customers, finish documentation for regulators, whatever). When I finally realized I could do that, it was already too late.

My take: When you’re a CTO and your zone is tech, it’s not your only area of responsibility. You have to be resilient and deal with everything that is important right now. Titles and relationships don’t matter — the main goal is to keep the company moving forward. If you need more customers — do sales, go to States, talk to clinicians, attend the conferences, talk with potential collaborators. Act as if it’s you only. Ask yourself every day — what else can I do that can help my company? And — do it. Recruit everyone around to help in this mission.

An elephant’s skin is generally very tough, at 2.5 cm (1 in) thick on the back and parts of the head.

Lesson #5: Take care of yourself

Being an entrepreneur is tough. You’re constantly living on the edge. Every day you deal with the new and unknown, you have to make decisions every day, every hour. You hear “no” all the time, you have to take care of your employees and be always there for them, for your partners, investors. It’s on you only. It took me a while to realize how bad my emotional state was. I was frustrated all the time, angry, I was lacking patience, and my physical condition was bad — I gained 13kg unhealthy weight and struggled to exercise at least weekly. And worst from that — when I took a vacation — I tormented myself for wasting my time, for spending it on minor things. Not on my startup.

Oh boy, how wrong I was.

My take: Take care of yourself. You’re of no help to your startup if you’re a powerless superhero. Your team needs your smile and strength every day. Invest in your physical and mental health on a daily basis. It will keep your sanity, it will help you to develop resilience and in tough days, it will help you to have a good mood even when there is a storm outside. Your body and health will never recover fully. Take care of it. You are the most important thing your startup has. Invest in yourself, because it’s part of investing in the startup.

Lessons should be learned not only from mistakes but also from the good things as well. There are many things that worked really well in our venture:

Lesson #6 International development teams working together in-house

The development team in Kiev

From the first day, we recruited developers from outside Israel. Lucky me, I’m speaking Russian, so we started working with developers from Ukraine and it gave us a lot of advantages. The price was one-third of what we would pay for developers in Israel. We got the first version in less than two months with high quality. Later we created combined teams of developers from Ukraine and developers from Israel and it gave us a lot of boosts to keep the pace very high while maintaining a low cost of development.

Lesson #7: Argue productively

Despite some disagreement between me and my partner — we succeeded to facilitate high-speed delivery and maintain a business relationship which allowed us to move forward. It was very hard work — the daily routine of managing expectations, the tone of voice, inclusion, healthy dialog and keeping on moving. We managed to go over a lot of “bumps” and as a fact we succeeded in building a product that was used by large hospitals in the USA & Israel.

Lesson #8: Don’t take your team for granted

Our Israeli team on early days

I think we had one of the best teams ever. Our folks helped us a lot till the last minute. Imagine you discuss some potential feature with your team and the next day you come to the office and a developer approaches you saying: “Wanna see something cool?” and shows you the implementation. Customer success folks were traveling around the global or scheduled calls with clinicians during the night just to hear their feedback and help them with the system. This was the kind of team I had.

We believed that we did a great thing by developing this project and willingly invested our personal resources in it. During the seed period, we didn’t take payment for the work and devoted a lot of personal time in this business sometimes neglecting the needs of our families (Dani has three kids!) We worked crazy shifts — one week you’re in Israel, the next week you’re in the USA. (This is not a recommendation — it’s just the way it was.)

The startup is all about the people who build it and we were privileged to have the best ones in our team.

Closure

With everything that I know today — I still would say yes to Eyal’s offer to join KolGene. The experience that I got is priceless. You’ll never learn anything like this in any “education” program in the world. I learned so much: about myself, partnership, people around me, eco-system, running a company, dealing with tons of shit all over the place.

So What’s next?

My next gig will find me when the right time and opportunity comes. It clearly will. Sooner or later.

As Churchill said and I believe in that a lot: “Success is stumbling from failure to failure with no loss of enthusiasm.”